Early reports from one of the art industry’s most significant U.S. events of the year pointed to a positive outlook for the art market, according to news outlets. Several galleries represented at the annual Art Basel Miami Beach, held Dec. 6-10, were reporting strong sales, including the sale of several works valued at more than $1 million and at least one piece that sold for $20 million.
“Art Basel is the most popular art fair in the U.S.,” said Heather Posner, Vice President, National Product Leader, Private Client, Burns & Wilcox, Cleveland, Ohio. “It is also probably the most star-studded art fair. It is a pretty exciting thing to follow.”
Whether in the thousands or the millions, any high-dollar-amount purchase made at an art fair should be immediately protected with a Personal Articles Floater, an insurance policy specifically designed for valuable items that would not be adequately covered by Homeowners Insurance, said Pamela Alphabet, Associate Vice President, Regional Practice Group Leader, Personal Insurance, Burns & Wilcox, Scottsdale, Arizona.
“How to insure it, how to protect the investment is really important — from literally getting it from the gallery to making sure it is properly packaged, transported, and hung,” Alphabet said. “They need to engage with their insurance broker to make sure they have that item properly insured to cover all of it.”
Insurance for fine art purchases ‘often overlooked’
Among those in attendance at Art Basel Miami were Jeff Bezos and his fiancé, who were seen during VIP gallery previews before they were open to the public, prompting rumors that Bezos may have made an art purchase, Entrepreneur reported. The coveted art fair attracts a wide range of buyers, however, Posner pointed out.
“There is a huge range of prices at this fair. You could be a new collector and buy your first piece for $10,000 or $30,000 if you are interested in one of the artists that may not be as popular or have as much history behind their artwork,” she said, adding that these buyers, in particular, could be at risk for leaving their investments uninsured. “They may not have any coverage in place. Then there is the individual who is a collector, but they splurge and buy their largest piece at the event.”
In either case, a Personal Articles Floater, also known as Inland Marine Insurance, should be obtained for these high-value items. The policy can provide coverage for physical losses due to accidental breakage, water damage, diminished value, and more, whereas a standard Homeowners Insurance policy would typically offer limited coverage or no coverage for such items. “The buyer may incorrectly assume that if the item is in their home, there is coverage,” Alphabet said.
You would be surprised how many high-net-worth individuals who have art or jewelry do not have a Personal Articles Floater policy.
This leads to Personal Articles Floaters being “often overlooked,” Posner added, as carrying the coverage is not usually required unless the purchaser is taking out a loan for the item from a bank. “You would be surprised how many high-net-worth individuals who have art or jewelry do not have a Personal Articles Floater policy,” she said. “They still have the misconception that it is covered under the Homeowners Insurance policy, and there may be a tiny bit of coverage, but certainly not enough for anybody that has a collection.”
Although an existing Personal Articles Floater can cover new acquisitions up to a certain percentage of the policyholder’s total collection value, a single high-value purchase could easily exceed that percentage, Posner said, and some collectors may not be aware of this limit.
“Individuals often splurge at these art fairs. If they have a $1 million collection and buy a half-million-dollar piece, then they would be very underinsured until they get to their insurance broker and have it added to their policy,” she explained.
Art could be at risk during transit, installation
Time is of the essence for securing a Personal Articles Floater, as many art losses take place during transit and installation shortly after the item is purchased, according to Posner. Fine art shipping disasters are not unheard of, with some of the most infamous incidents including a $1 million Francisco de Goya painting that was stolen from an artwork shipping truck in 2006 and a £3.5 million Lucian Freud painting that was accidentally disposed of by an art handling company in 2000, according to Fine Art Shippers.
“Transit is the largest cause of loss when it comes to art,” Posner said, pointing to the importance of working with reputable professionals for shipping and hanging works of art. “It is really important that individuals have their pieces insured during those times and that they choose credible art transport companies and shipping companies. Sometimes insurance contracts will exclude coverage if you did not pick a reputable shipping company.” It is also extremely important for those that have a Personal Articles Floater to contact their insurance broker to determine their transit limits, she adds.
Transit is the largest cause of loss when it comes to art. … Sometimes insurance contracts will exclude coverage if you did not pick a reputable shipping company.
The time immediately following a fine art purchase, including transit, “is definitely a time when [the investment] is at risk,” Alphabet agreed. “You could purchase insurance from the courier that is going to bring it, but for the average individual buying their first large piece that is not in the millions of dollars, but in the thousands, they will want to engage with their insurance broker to understand when they need to insure it and whether it is covered for transport, just in case,” she said. “They should at least have that understanding. If it is someone who is traveling, they also want to make sure they look at worldwide coverage.”
A Personal Articles Floater can also cover fine art losses due to theft, which is another serious peril for collectors. Previous reports have estimated global art theft losses to be between $6 billion to $8 billion per year, according to Artwork Archive, and an August 2023 museum theft report by the Guardian noted that the global Art Loss Register database listed more than 700,000 missing pieces of art, antiques, and collectibles.
“One of the reasons there is a huge value in having a Personal Articles Floater is that everything is generally covered. All perils are covered unless otherwise excluded,” Posner said. “Usually, we do not see exclusions unless there is a very high risk for that particular area or item. Earthquake, wind, flood, accidental damage, theft — there is usually coverage for all of those on an art policy unless they specifically excluded it. Even damage because perhaps it was hung in the wrong place and it faded, for example, that could potentially be a covered peril.”
Art investments on the rise
Art investments are on the rise among high-net-worth individuals, the Globe and Mail reported in September, and Knight Frank’s Wealth Report 2023 found that art was a top investment performer in 2022, according to Tatler. “I think there is more purchasing happening in the art world,” Alphabet said. “There is more money out there and individuals are looking for items that will appreciate.”
I think there is more purchasing happening in the art world. There is more money out there and individuals are looking for items that will appreciate.
Just as sources suggested regarding this year’s Art Basel Miami, the art market appears to have rebounded since the pandemic and is expected to continue to grow, Posner said. “There was a short period of time when the art market was down. Often, if the stock market is not creating the type of return that individuals want, they will invest in other things they know will appreciate, like art,” she said. “I am seeing an uptick in art and also, because of COVID, there has been an increase in online sales and auctions; because of that, I think the industry is really booming.”
As art pieces gain value over time, collectors will want to ensure that their pieces are insured to their full value. In between reappraisals, which may occur every three to five years, some Personal Articles Floater policies can include extra coverage to account for appreciation, known as an extended replacement cost clause. “You want to make sure that you have that cushion,” Alphabet said. “There are policies out there that can include up to 150% of the value at the time of the loss. You want to look for a policy that is going to take that into account, and work with a broker who has that expertise.”
There are policies out there that can include up to 150% of the value at the time of the loss. You want to look for a policy that is going to take that into account, and work with a broker who has that expertise.
Understanding your policy and what the payout would be in the event of a loss “is really important,” Posner added. “You really have to watch your art collection,” she said, adding that reappraisals can also be requested as needed. “If you know that something is trending and has really gained popularity since you have purchased it, that is probably a good time to see if a new appraisal would make sense.”